Some private insurance companies that provide Medicare Advantage plans have been defrauding Medicare (and taxpayers) to the tune of $10 billion per year. Federal officials are aware of this, as are the Centers for Medicare and Medicaid Services (CMS). All of the agencies involved are finally ready to take action to recoup the money stolen through the Medicare Advantage fraud.
How did the fraud happen?
Medicare Advantage plans are provided by private insurance companies. When they pay providers for patient care, Medicare reimburses them using a formula called a “risk score.” This procedure was established in 2003 to ensure Medicare Advantage plans didn’t shy away from covering sicker patients.
According to Kaiser Health News, some plans have regularly exaggerated how sick their patients were and how many illnesses they had. For example, some plans reported that their diabetic patients also suffered from eye and kidney problems, although the patients did not.
How did the plans get away with it?
These plans have been getting away with this because most insurers will go years without being audited by CMS, which is when the agency confirms appropriate billing practices. If the plans are found to have committed fraud, they are only fined a few hundred thousand dollars–a small percentage of the money they have stolen.
Another reason for the prolonged Medicare Advantage fraud is that these plans are owned by private insurance companies who hold a lot of lobbying power. CMS was made aware of this problem in the past, but backed off from efforts to correct the situation through lobbying intimidation.
How bad is it?
Plans committing fraud have cost taxpayers $30 billion over the past three years alone.
In an audit of 37 Medicare Advantage plans, auditors were only able to confirm 60 percent of more than 200,000 health conditions. This means nearly half of all reported medical conditions were falsified.
Political analyst and Senator Claire McCaskill (D-MO) says government officials must push back against the powerful private insurance lobby and demand refunds for the inappropriate billing.
“There are a lot of things that could cause Medicare to go broke,” she said. “This would be one of the contributing factors; $10 billion a year is real money.”
What happens next?
CMS has released a list of plans committing Medicare Advantage fraud, but it has not disclosed how much each plan owes in repayment.
The agency also has a plan to recoup $1 billion by 2020 using a new method of audits called extrapolation audits. CMS officials said they have already performed nearly 100 extrapolation audits for payments between 2011 and 2013, which are expected to recoup about $650 million.